After looking up some information for tonight’s meeting regarding rent control in Burbank, I had to ask the question: Is AI now smarter than our elected representatives? See below and you may be asking the same question.

How many small Landlords are in Los Angeles County?

Approximately 50-60% of rental properties in Los Angeles are owned and managed by “mom-and-pop” landlords. These smaller landlords typically own fewer units (often just one or two properties) and are considered a significant portion of the rental housing market in the city.

This estimate is based on data indicating that smaller landlords own a considerable amount of the rental stock across the U.S., particularly in cities like Los Angeles where single-family homes and small multi-unit properties are common. However, specific percentages can vary depending on the data source and how “mom-and-pop” landlords are defined. In other words, because many small owners from LLC’s when buying property, the # could be larger.

You said:

What might be some untended consequences of over regulation?

ChatGPT said:

Overregulation in housing, especially in contexts like rent control or stringent tenant protection laws, can lead to several unintended consequences, impacting both landlords and tenants. Here are some key potential outcomes:

1. Reduction in Housing Supply

• Landlords Leaving the Market: Overregulation can push smaller, “mom-and-pop” landlords out of the market due to increased compliance costs, making it harder to manage and maintain properties profitably. Some might sell their properties, reducing the overall supply of rental housing.
• Decreased Investment in New Construction: Developers may be discouraged from building new rental units if they believe future rent increases will be heavily restricted, leading to a long-term reduction in available housing.

2. Decline in Property Maintenance and Quality

• Maintenance Neglect: When landlords are restricted in how much they can charge for rent or are burdened by numerous regulations, their profit margins shrink. This can reduce the incentive or financial ability to properly maintain properties, potentially leading to deteriorating housing conditions.
• Delays in Upgrades: Expensive upgrades like energy efficiency improvements, structural repairs, or modernization might be delayed or avoided entirely, leaving tenants with subpar living conditions.

3. Higher Rents for New Units

• Inflation of Market-Rate Rents: In a highly regulated environment, newly built units or units exempt from regulation might have much higher rent prices to compensate for the perceived risk or loss of flexibility in other parts of the market.
• Shadow Markets: Landlords may find creative ways to charge more, such as additional fees for parking, utilities, or even illegal rent increases, leading to a more opaque and less predictable rental market.

4. Increased Evictions

• Disincentive to Rent to Riskier Tenants: Landlords may become more selective about who they rent to, avoiding tenants they perceive as riskier (such as lower-income tenants or those with weaker credit) if eviction processes become too cumbersome or costly.
• Preemptive Evictions: If new tenant protection laws or rent control measures are anticipated, landlords might preemptively evict tenants to avoid being subject to future restrictions, increasing housing instability.

5. Concentration of Property Ownership

• Institutional Investors Take Over: Smaller landlords, who may struggle to navigate complex regulations, could sell their properties, leading to a concentration of ownership by large corporate landlords or real estate investment trusts (REITs). These larger entities are often better equipped to handle regulatory complexities, but they may be less connected to the local community and more driven by profit, potentially leading to more aggressive rent increases or evictions.

6. Decreased Flexibility for Tenants

• Lower Mobility: Tenants who benefit from rent-controlled or highly regulated rental agreements may be reluctant to move, even when they might otherwise want or need to, out of fear of losing their affordable rent. This reduces housing flexibility and can lead to inefficiencies in housing allocation (e.g., people staying in units that are too large or too small for their needs).

7. Black Market Rentals

• Informal Arrangements: Overregulation can lead to a rise in informal or illegal rental agreements where landlords and tenants bypass formal lease agreements, leading to increased vulnerability for both parties, especially for tenants who lose legal protections.

8. Disparities in Impact

• Disproportionate Impact on Low-Income Tenants: Although regulations are often designed to protect low-income tenants, the unintended consequences (such as reduced supply or selective leasing) can disproportionately harm the very people they’re intended to help. If landlords tighten criteria for tenants or reduce available units, it can be harder for vulnerable groups to find housing.

Overall, while regulations aim to protect tenants and promote fairness, overly stringent or poorly designed regulations can sometimes backfire, leading to reduced housing availability, lower quality, and less affordability in the long term.

ABOUT KARI NEGRI

— Name any aspect of the complex world of property management and Kari Negri has been at the forefront, forging new ground, fighting for the rights of property owners and tenants alike, adding value, and making a significant difference. With a strong background in management, Kari founded SKY Properties, Inc. in 1997 to offer hands-on, boutique-level property management at a competitive price for multi-tenant property owners. Do you have a question for me? Please send your questions and comments to me at Kari@SKYprop.LA.